While corporate Australia has been preoccupied with tax reform – or rather the lack of it – in the past week, another big issue to consider is looming this Sunday.

The government will release its long-awaited policy on the Asian Century and some in the business community have high hopes it will provide a framework for improving engagement with the only part of the world with any short-term growth prospects at the moment.

The Asia theme was evident in yesterday’s two big corporate news stories.

James Packer
won the NSW government’s blessing to build a $1 billion hotel and gaming complex in Sydney, which may eventually smash the casino monopoly enjoyed by rival
Echo Entertainment
.

There are many sides to the story of Packer’s latest coup, but the reason he is pursuing the casino plan for Sydney so aggressively is the prospect of a tsunami of cashed-up gamblers pouring into the harbour city from Asia.

Packer’s interests in Macau casino operator Melco Crown means he, or at least his advisers, have a firm grasp of the earnings potential from Chinese high rollers who are not shy about spending money in six-star facilities.

ANZ Banking Group
chief
Mike Smith
is another executive who understands the importance of Asia.

Releasing the bank’s $6 billion annual profit result yesterday, Smith talked up the idea of sending local back-office and technology jobs offshore to Asia to save costs.

Related Quotes

Company Profile

British-born Smith is of course well known for ANZ’s “super regional" Asia strategy which he launched five years ago, differentiating the bank from its peers with a clear growth strategy and helping to cushion the impact of slowing growth at home.

Smith has been determined not to let little obstacles like the global financial crisis and a 25 per cent appreciation in the value of the Australian dollar get in the way of the plan for up to 30 per cent of profits to come from outside Australasia by 2017.

He noted yesterday that China and India were still the growth engines of Asia, reinforcing comments he made recently about Australian companies becoming so dazzled by the bright lights of Shanghai and Beijing that they were ignoring Mumbai.

There are not as many Australian companies seeking to leverage off Asia’s economic fortunes as there should be, given our proximity, even when you weigh the huge bureaucratic and competition hurdles to doing business in places like China.

“It is the issue that needs to be on top of businesses’ agenda," says
James MacKenzie
, who is a director of China-backed Yancoal and Melco Crown. He also chairs property group Mirvac.

“We are not an island anchored off Southampton. We are a resource-rich, wealthy economy and whether people like to accept it or not, it is part of Asia. Any initiative the government takes that improves the way we engage with Asia is to be applauded."

MacKenzie is one of those executives who has spent years working in Hong Kong and understands that Asia is not something to be threatened by.

He and others who have worked in the region realise business must become more Asia-literate, whether that is through language, better engagement or the ability to embrace a different way of thinking.

This is becoming evident in the surge of interest from Asia in the nation’s agriculture assets in recent weeks.

Many business leaders privately complain about a medieval approach in the way Australia engages with Asia, and of growing perceptions in China about the sovereign risk of doing business here.

Wesfarmers chief
Richard Goyder
, who visited China with his board earlier this year, said yesterday: “This is a very important area for the country to get its head around in terms of our engagement with China and other countries. I hope it [Asian Century policy] will help in terms of a bit of a road map."

Telstra, which regards Asia as a key growth area, lost the Hong Kong-based head of its international arm Tarek Robbiati this week. Many viewed this as a setback given its China-based director Tim Chen left suddenly last month.

However, it is worth remembering that Telstra still has chief financial officer Andy Penn in its arsenal.

In his previous incarnation, Penn built up AXA Asia Pacific’s $10 billion operations in the region and has had more success in the area than many Australian-based executives.

Packer’s gain yesterday was Echo Entertainment’s pain.

NSW Premier
Barry
O’Farrrell signed off on the first stage of Crown’s proposal to build a $1 billion hotel and gaming complex down the road from The Star at Sydney’s Barangaroo site.

The news broke just minutes before Echo’s annual general meeting at Jupiters Casino on the Gold Coast, where chairman John O’Neill did not exactly receive a warm welcome from shareholders after a shocking year.

While Echo is quick to point out that even if Packer were to clear the remaining hurdles to his Sydney casino ambitions, any development is still seven years away when the current exclusivity deal ends.

A lot can happen in seven years but O’Neill’s words were not reassuring for investors who have lost almost 10 per cent on Echo shares in the past two days.

Echo’s challenge now is to leverage its advantage as the incumbent and make the most of the next seven years in a monopoly by chasing in what should be Australia’s biggest growth market for VIP gamblers.

There was talk from the Echo chairman yesterday of considering the idea of a second casino in Sydney although that prospect seems unwise if Crown is setting up shop just down the road.

O’Neill was also keen to deflect attention from Sydney and talk about growth prospects in Queensland where the company is considering spending $1.3 billion to redevelop Jupiters and on a new casino in Brisbane.

However, it is still unclear what Malaysia’s Genting plans to do with its 10 per cent stake in Echo.

Competing against a combined Genting-Echo is not something Packer would relish.

Echo does not know what Genting wants either at this stage and is trying to pursue a growth strategy independent of its distracting major shareholders – Crown and Genting.

There was plenty of colourful language at yesterday’s AGM but O’Neill stresses the company is not about to “fire off Scud missiles" and show its hand.

Packer appears to be holding all the aces at this stage of the game, however.

Echo will soon be rudderless with chief executive
Larry Mullin
about to depart just when the company is recovering from a damaging sexual harassment scandal that marred the revamp of the The Star.

Echo said yesterday that gross revenue rose 13 per cent in the first 16 weeks of the financial year with trading strong at The Star.

However, Goldman Sachs analysts noted growth was slowing at the Sydney casino with 15 per cent growth year to date versus 20.7 per cent in the first 10 weeks.

A replacement has not been found yet for Mullin although insiders say the board is optimistic about the potential candidates.

O’Neill, who earlier this year ousted former chairman John Story, is right to call for a public tender process for a second licence.

You can hardly blame Packer for taking advantage of the loophole.

But O’Farrell will have to explain why the government did not choose to go through a competitive tender process.

Either way, there should be a handsome return for NSW taxpayers from a second casino in the state.

In 1994, Echo paid $256 million for its licence plus an additional $120 million in pre-paid rent. It later paid a further $100 million to extend the current exclusivity arrangement.